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Market Situation

mark welch TAMU

Dr. Mark Welch
Extension Economist – Grain Marketing in the Department of Agricultural Economics
Texas A&M Univresity

Texas A&M AgriLife Associate Professor and Extension Economist Mark Welch offers the following market information in his newsletter “Feed Grain Outlook.”U.S. corn exports face increasing competition from foreign producers. Corn producers in the Black Sea region of Ukraine and Russia have completed the 2019-2020 harvest on the same basic crop calendar as the United States. Harvest of first crop corn in Brazil is underway with Argentina soon to follow. Total production from these four countries is forecast to reach another record.

Grain Use

Corn export sales for mid-January were good at 40 million bushels. Sales reported the past two weeks have been above the 30 million-bushel threshold needed to reach the marketing year target of 1.77 billion. However, cumulative sales continue to lag with 45% of the marketing year total on the books in mid-January compared to 63% last year.

Corn for feed use has been positive. The cattle on feed report showed numbers in lots of 1,000 head or more at 11.958 million head, up 2% compared to last year and 9% higher than the five-year average. The broiler hatchery report from Jan. 22 showed broiler chicks placed up 4% compared to last year and 5% above average.

The Leading Economic Index for December was 111.2, down 0.3% from November and down 0.4% for the past three months. For December, five of the 10 components that make up the index increased, led by higher stock prices.

The seasonal tendency of the December corn contract is to exhibit an upward price trend through the spring. After peaking in June, contract prices usually fall below the year’s average price by mid-July. That early season price strength is normally associated with acreage, yield and demand uncertainty.

Marketing Plan

I have priced the first 10% of the 2020 corn crop at $4.10. That price covers total costs in my preliminary budgets, is higher than my first sales the past several years and is about all the market offered at the time.

Since the signing of Phase 1 of the China trade deal Jan. 15, March corn futures have gone from $3.90 to $3.80 and soybeans from $9.40 to $9. Questions remain as to how and when China will follow through with promised increases in imports of agricultural goods.

On the horizon for 2020 may be a significant increase in corn acres. If it bounces back to the level U.S. farmers intended to plant last year, it would be 92.8 million, up from 89.7 million reported in January 2019. If yields in 2020 average around 176 bushels per acre as in 2016 to 2018, production would be near record levels.

Corn planting intentions in 2020 will be shaped by the relative price and profitability of soybeans. Resumption of exports to China would support the soybean market and influence the acres of both crops. Any speculation regarding exports is exacerbated by the rapidly spreading coronavirus and the impact it could have on economic activity in China and beyond.

Market uncertainties are putting more downward pressure on early season prices at this point.